Finance chief to get power over granting of tax perks

January 16, 2018 at 10:52

The secretary of finance, who is in charge of the country’s fiscal health, will be granted the power to take away tax and other incentives from investors if deemed unnecessary once the Duterte administration’s second tax reform is passed into law.

The Department of Finance’s proposed second of five tax packages will be submitted for the consideration of the House ways and means committee today, Finance Undersecretary Karl Kendrick T. Chua said last Friday.

Based on DOF presentations obtained by the Inquirer, one of the proposed reforms in the second tax package include a regular review to be undertaken by the Fiscal Incentives Review Board (FIRB) of all tax and other perks given away by the various investment promotions agencies (IPAs).

Under the DOF proposal, the secretary of finance can cancel or suspend the grant of incentives upon the review and recommendation of the FIRB, a power that the official does not have at present.

The granting of tax incentives are currently in the hands of IPAs, which attract investors by dangling fiscal perks.

In the past, the DOF and the Department of Trade and Industry, to which some IPAs are attached, were at odds over the supposed grant of generous tax exemptions to businesses.

Under the proposed second tax reform package, the FIRB’s function will be expanded to serve as the overall administrator of all IPAs as well as their incentives; to review all IPA policy decisions as well as approve all IPA grant of investment tax incentives, on top of its current function of granting tax subsidies to state-run corporations and government offices.

The DOF, as FIRB chair, “shall have veto power as the custodian of fiscal prudence and responsibility,” it said.

The DOF will also be co-chair at the Board of Investments, the Philippine Economic Zone Authority as well as the 12 other IPAs, while the state planning agency National Economic and Development Authority will be a member in all 14 IPAs.

The second tax package will rationalize investment tax incentives by providing a single menu of incentives across all IPAs; barring double registration of activities; granting income tax incentives only to new activities and investments; allowing only availment of exemption from customs duty of capital equipment for expansion projects, and defining exporters as those with at least 90 percent of sales actually shipped out abroad.

The incentives menu will include income tax holiday; replacing the 5-percent gross income tax in lieu of all taxes with a reduced 15-percent corporate income tax rate based on net taxable income; other income-based perks such as investment tax allowance as well as double deduction for research and development and training expenses, and customs duty exemption.

Also, all companies must pay value-added tax and later on prove that they export to get a refund as VAT will no longer be an investment incentive and cannot be used in the separate customs territory argument especially for buildings, the DOF said.

Source: https://business.inquirer.net/244092/finance-chief-get-power-granting-tax-perks